Payment Wars: Corduro Takes on Square, PayPal

Corduro, a Google (s goog) Ventures-backed start-up, isn’t going after just one piece of the payments puzzle. It’s more like three companies in one, said its CEO Robert Ziegler. But if it can get them all working together, Corduro is hoping to provide a potent challenge to mobile payment providers like PayPal (s ebay) and Square, as well as back-end payment processors and customer relations software providers.

The company has built a sophisticated cloud platform that allows it to offer a host of features, including a digital mobile wallet service for consumers as well as a payment service and back-end CRM system for merchants. By wearing a bunch of hats as a payment processor, gateway and technology integrator, and putting it all together into an intelligent vertical system, Corduro is able to provide a broader set of services and process core payments at a lower price.

The savings will be one of the first things to catch the attention of merchants. According to Corduro, which came out of stealth mode Wednesday, merchants and people who accept payments through Corduro pay up to 30 percent less in fees. That’s because Corduro routes transactions through the cheapest path: often, the debit network. Corduro said it charges 2.65 percent on swiped transactions via mobile phones and 1.9 percent plus 20 cents for swiped transactions in store, less than what Square and others charge on transactions. Corduro can work with existing swipe machines and mobile phone hardware accessories, and can route transactions through its back-end system. It can also process online payments, and offers cheaper fees for non-profits and charities.

Corduro’s system is able to connect multiple mobile devices with one account, allowing a company or charity to gather payments from many devices. The system also provides account owners with a lot more consumer information, so they can better manage their relationships with consumers.

On the consumer side, Corduro said its mobile app can be used as a mobile wallet, so users can load up their payment accounts along with loyalty cards. That will make it easy for consumers to pay with businesses that use Corduro. It could even eventually allow ordering from a merchant’s menu through the Corduro app without waiting in line. But the company believes that it can extend the relationship between merchant and customers, and encourage consumers to become brand ambassadors by making it easy for them to share deals with friends.

It’s an ambitious play for Corduro, which is funded by Google Ventures, Founder Collective and Western Technology Investments. But it shows there’s still a lot of movement in the mobile payments world, which we said could be worth $633 billion by 2014. As I wrote earlier this week, Visa (s v) is ramping up its own digital wallet initiative tying in recent purchases of CyberSource and Playspan. Other companies like PayDivvy are introducing online and group bill pay, while PayNearMe expanded its ability to pay for bills, transportation tickets, money transfers using cash at 7-Eleven stores.

PayPal has a big head start in this area, and start-ups like Square are transforming the way merchants accept payments. But as we’re seeing, there are still opportunities for companies, big and small, to innovate here by attacking specific areas or stepping back and building broader solutions. The challenge will be for companies like Corduro to get in front of consumers and merchants and explain the benefits of the system and win the trust of consumers, especially in a market with more and more options.